SHRI VASANTRAO BANDUJI PATIL TRUST,SANGLI V. CIT(EXEMPTION), PUNE, PUNE

ITA 2134/PUN/2025

AI Insights

The case involves the Shri Vasantrao Banduji Patil Trust, a public charitable trust engaged in educational activities, which sought registration under section 12A of the Income Tax Act, 1961. The Trust's application was initially rejected by the CIT(E) due to non-compliance with section 36A of the Maharashtra Public Trust Act, 1950, concerning loans taken from trustees and banks without the necessary permissions. The Trust appealed this decision, arguing that the rejection was based on procedural irregularities rather than substantive disqualifications and that it had already sought ex-post-facto approval from the Charity Commissioner. The Tribunal found merit in the Trust's arguments and remanded the case for a fresh decision.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840415 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 12-09-2025
• Other Referred Cases: Snehabandh Foundation, Sangli Vs. CIT (Exemption), Pune ITA Nos. 2500 & 2501/PUN/2024, Shri Chhatrapati Shahu Maharaj Shikshan Sanstha Motala ITA Nos. 368 & 369/Nag./2024, Baramati Vipassana Samiti ITA Nos. 2642 & 2643/PUN/2024
• Laws Referred To: Income Tax Act, 1961, Bombay Trust Act, 1950, Maharashtra Public Trust Act, 1950
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT BOBDE
• Assessee Lawyers: B.C. MALAKAR
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; TDS; Charitable institution; Procedural lapse
• Section: 12A

Judgement Text

" आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2134/PUN/2025 Shri Vasantrao Banduji Patil Trust, South Shivaji Nagar, Sangli Miraj Road, Miraj, Sangli-416416 PAN : AAETS2964F Vs. CIT, Exemption, Pune अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri B.C. Malakar Department by : Shri Amit Bobde Date of hearing : 09-02-2026 Date of Pronouncement : 23-02-2026 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 20.08.2025 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him on 20.03.2025 in Form No. 10AB under section 12A(1)(ac)(vi)-ITEM(B) of the Income Tax Act, 1961 (the “Act”). 2. Briefly stated, the facts of the case are that the assessee is a public charitable trust registered under the Bombay Trust Act, 1950 since 25.02.1979. It is engaged mainly into running of educational institutions thereby carrying out the educational activities as per objectives of the trust. The assessee trust was granted provisional registration u/s 10(23C)(vi) of the Act vide registration certificate dated 28.05.2021. Thereafter, the assessee applied for regular registration u/s 12A(1)(ac)(vi) of the Act on 20.03.2025 in Form No. 10AB u/s 12A(1)(ac)(vi)-ITEM(B) of the Act. On receipt of the said application filed by the assessee for regular registration u/s 12A(1)(ac)(iii) of the Act along with annexures thereto, with Printed from counselvise.com 2 ITA No.2134/PUN/2025 a view to verify the genuineness of the activities of the assessee and compliance to requirements of any other law for the time being in force, the Ld. CIT(E) issued notice through ITBA portal on 02.05.2025 requesting the assessee to upload certain information/clarification contained therein, seeking compliance by 19.05.2025. On verification of the details/ documents submitted by the assessee, the Ld. CIT(E) noted certain discrepancies which were communicated to the assessee vide issue of notice dated 15.07.2025 seeking compliance by 23.07.2025. The said discrepancies observed by the Ld. CIT(E) are as under : \"(i) As regard, the educational activities, please furnish the following: (i) Details of various institutes/schools/colleges run by the trust with granted / non-granted status, (ii) Copies of affiliation certificates. (u) Details of institute wise fee structure, admission policy in respect of each of the institute and grant sanction letter in case of granted institution. (iv) Institute- wise Income & Expenditure and Receipt & Payment account for the last 3 years. (v) Complete Financial statements for the last 3 years with all Schedules / Annexures. (vi) Copies of Audit report for the last 3 years. (vii) Details of admissions given to students from financially weaker sections of the society with evidence and RTE norms followed with evidence. (viii) Institute wise details of ownership of land and building for with evidence. If rented, copy of rent agreement and proof of ownership of the owner. (ix) Details as to whether the land is owned by the persons covered u/s 13(3) of the Act. (x) Institute wise details of immovable properties and building constructions appearing in balance sheet. (xi) Detailed LIST of salary payments to teaching and non-teaching staff along with TDS made, PF deducted, Profession Tax Deducted and copies of TDS returns & Profession Tax Returns filed for the last 3 years. (xii) Year-wise details of addition to building fund and other funds with evidence of its source. (xiii) Complete details of loans raised, if any, for the last 3 years and its utilization for each of the institution / project along with copy of permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner. Please also ensure that the documents /information called for vide the earlier notice(s) are furnished. (ii) Trust has taken loans. Purpose of the same and its utilization for trust objects along with copy of permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner has not been furnished. Also, relevant schedule is not furnished. (iii) As per financial statements furnished by you, it is seen that the trust has claimed deduction u/s 11. Therefore, said provisions of sec. 12A(1)(ac)(vi)(B) of the Act are not applicable to your case. As such, your present application is liable to be rejected. Please clarify with supporting documents. Also furnish ITRs of the FYs for the relevant years.\" 3. The assessee filed its reply to the above notice on 22.07.2025 and after considering the same, the Ld. CIT(E) rejected the application of the assessee by observing as under : “6. The assessee responded to the said notice and furnished the compliance on 22.07.2025. The assessee submitted that it has not taken any loan, Printed from counselvise.com 3 ITA No.2134/PUN/2025 however as per the financial statement, it is seen that the assessee has taken loan amounting to Rs. 3,43,000/- from other than trustees and Rs. 3,68,00,804/- from banks. However, it has not submitted a copy permission from Charity Commissioner for raising loan from persons other than trustees. From the reply, it is revealed that the trust has not obtained permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner. Taking loans to meet the funds requirement cannot be accepted as an excuse for non-compliance as sec. 36A(3A) provides that \"notwithstanding anything contained in sub-section (3), in exceptional and extraordinary situations where the absence of previous sanction contemplated under sub-section (3) results in hardship to the trust, beneficiary or bonafide third party, the Charity Commissioner may grant ex- post- facto sanction to borrow moneys from any nationalized bank or the Scheduled Bank, by the trustees.].\" Thus, the trust could have obtain ex-post facto permission from the Charity Commissioner. It, however, failed to do so. 7. Considering the above facts discussed in the show notice and discrepancies noticed and also that the assessee has not complied with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961 as well as the provisions of Rule 17A(2) of Income Tax Rules, 1962 in spite giving sufficient opportunities, the undersigned is unable to draw any satisfactory conclusion about the compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects. 8. In view of the above, the application filed by the assessee under section 12A(1)(ac) (vi)-ITEM(B) of the Income Tax Act, 1961 is hereby rejected.” 4. Aggrieved, the assessee is in appeal before the Tribunal raising the following grounds of appeal : “1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac)(vi)- ITEM(B) of the I.T. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the I.T. Rules, 1962 ignoring and without appreciating the facts that non-obtainment of sanction/permission under section 36A of the Maharashtra Public Trust Act, 1950 is a procedural irregularity and not a substantive disqualification for which such registration could be rejected by him. The order rejecting the application filed by the appellant in Form 10AB for registration u/s.12A(1)(ac)(vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 2. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac) (vi)- ITEM(B) of the LT. Act. 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, Printed from counselvise.com 4 ITA No.2134/PUN/2025 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the LT. Rules, 1962 without providing adequate opportunity of being heard to the appellant in violation of principle of natural Justice and against the principles laid down in the cases of Snehabandh Foundation, Sangli Vs. CIT (Exemption), Pune ITA Nos. 2500 & 2501/PUN/2024, Order dated 02/05/2025 (ITAT Pune). The order rejecting the application filed by the appellant in Form 10AB for registration u/s.12A(1)(ac)(vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 3. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac) (vi)- ITEM(B) of the 1.T. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the LT. Rules, 1962 ignoring and without appreciating the facts that Section 36A deals with financial oversight but is not part of the eligibility criteria under section 12A/12AB of the Act and since the appellant trust was carrying out its charitable activities in accordance with its objectives and the provisions of any other law could be considered as material, but procedural breach alone should not destroy the eligibility as laid down in the decision of the case of Shri Chhatrapati Shahu Maharaj Shikshan Sanstha Motala ITA Nos. 368 & 369/Nag./2024 Order dated 14/05/2025 (Nagarpur ITAT). The order rejecting the application filed by the appellant in Form 10AB for registration u/s.12A(1)(ac) (vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 4. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac)(vi)- ITEM(B) of the LT. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the LT. Rules, 1962 ignoring and without appreciating the facts that the impugned order passed by the CIT Exemption made no distinction between major procedural default and substantive defects as the loans were used for bonafide charitable purposes and are not indicia of lack of genuineness. The order rejecting the application filed by the appellant in Form 10AB for registration u/s.12A(1)(ac)(vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. Printed from counselvise.com 5 ITA No.2134/PUN/2025 5. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac) (vi)- ITEM(B) of the L.T. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the I.T. Rules, 1962 ignoring and without appreciating the facts that the loans obtained by the appellant were used for charitable purposes without sanction from the charity commissioner do not affect the genuineness of activities as held by the Hon'ble Pune ITAT in the case of Baramati Vipassana Samiti ITA Nos. 2642 & 2643/PUN/2024. Order dated 03/04/2025 (Pune ITAT). The order rejecting the application filed by the appellant in Form 10AB for registration u/s.13A(1)(ac)(vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 6. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CTT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac)(vi)- ITEM(B) of the I.T. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 364 of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the I.T. Rules, 1962 ignoring and without appreciating the facts that the said section 36A(3) mandates prior sanction for loans which is regulatory in nature and the Charity Commissioner has the power to grant ex-post factor sanction for loans in appropriate cases and the appellant is in the process of obtaining such sanction. The order rejecting the application filed by the appellant in Form 10AB for registration u/s-12A(1)(ac) (vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 7. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax, Exemption, Pune (hereinafter called as CIT Exemption) erred in rejecting the application filed by the appellant trust on 02/03/2025 in Form No. 10AB u/s.12A(1)(ac) (vi)- ITEM(B) of the LT. Act, 1961 vide order dated 20/08/2025 observing and holding that by not obtaining the permission from Charity Commissioner under section 36A of the Maharashtra Public Trust Act, 1950 for obtaining loan from than the trustees and the banks the trust had violated the provisions of the said Act in as much as had not complied the provisions of section 12AB(1)(b)(i) of the Act read with Rule 17A(2) of the I.T. Rules, 1962 ignoring and without appreciating the facts that no adverse finding or proceeding had been initiated by the Charity Commissioner holding the appellant trust in breach of section 36A of the Maharashtra Public Trust Act, 1950 and therefore there was no concluded violation that would constitute \"Non- compliance of other laws\" as under section 12A(1)(ac) (vi) (B) of the I.T. Act, 1961. The order rejecting the application filed by the appellant in Printed from counselvise.com 6 ITA No.2134/PUN/2025 Form 10AB for registration u/s.12A(1)(ac)(vi)-ITEM (B) contrary to the scheme of Section 12AB of the Act so passed by the CIT Exemption being arbitrary, illegal and bad-in-law be quashed directing him to grant such registration to the appellant. 8. The appellant craves leave to add, alter, delete, amend, withdraw, modify, change or substitute any ground or grounds of appeal or to add any new ground or grounds of appeal during or before the hearing of the appeal.” 5. The Ld. AR submitted that the Ld. CIT(E) was not justified in rejecting the application of the assessee for failure to obtain sanction from Charity Commissioner in respect of loan transaction with the trustees of the assessee trust. The Ld. AR submitted that the assessee has already filed an application before the Charity Commissioner as required under the provisions of section 36A(3A) of the Maharashtra Public Trust Act, 1950. He contended that the assessee was not given adequate opportunity by the Ld. CIT(E) to explain the loan transaction and further that non-compliance with the other statutory laws cannot be the ground for rejection of the assessee’s application for registration u/s 12A of the Act. He, therefore, requested that the matter may be set aside to the file of the Ld. CIT(E) to adjudicate the application of the assessee on merits after affording an opportunity of hearing to the assessee. 6. The Ld. DR relied upon the order of the Ld. CIT(E) but had no serious objection if the matter is set aside to the file of the Ld. CIT(E) for re- consideration of assessee’s application. 7. We have heard the Ld. Representatives of the parties and perused the material available on record and paper book filed by the Ld. AR on behalf of the assessee. The facts of the case are not disputed. The Ld. CIT(E) has rejected the application for registration u/s 12A of the Act filed by the assessee on 20.03.2025 for the reasons reproduced above. Before us, the Ld. Counsel for the assessee has submitted that the assessee was not granted adequate opportunity by the Ld. CIT(E) to explain the loan transaction. The assessee trust has already applied for ex-post-facto approval from the Charity Commissioner. The Ld. AR has therefore requested that the assessee may be granted an opportunity to substantiate and explain its case before the Ld. CIT(E) by filing the requisite Printed from counselvise.com 7 ITA No.2134/PUN/2025 details/submissions to his satisfaction. Considering the totality of the facts and in the circumstances of the case, we deem it fit, in the interest of justice and fair play, to set aside the impugned order of the Ld. CIT(E) and remand the matter back to his file with a direction to decide the assessee’s application for registration u/s 12A of the Act afresh in light of the submissions of the assessee and such other information/details as may be called upon by the Ld. CIT(E), as per fact and law after giving a reasonable opportunity of hearing to the assessee. We direct and order accordingly. The grounds raised by the assessee are thus allowed for statistical purposes. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 23rd February, 2026. Sd/- Sd/- (Manish Borad) (Astha Chandra) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 23rd February, 2026. रदि आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1. अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, सहायक पंजीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com "